House prices inched up 0.4 percent in May, on a seasonally adjusted basis from the previous month, according to the Federal Housing Finance Agency’s monthly House Price Index. The previous month was revised up from 0.3 percent percent change in April to instead reflect a 0.4 percent change.
Then index is based on home sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac.
From May 2014 to May 2015, house prices were up 5.7 percent. For comparison, the U.S. index is 1.8 percent below its March 2007 peak and is roughly the same as the April 2006 index level.
For the nine census divisions, seasonally adjusted monthly price changes from April 2015 to May 2015 ranged from -0.6 percent in the East South Central division to 1.1 percent in the East North Central division. In addition, the 12-month changes were all positive, ranging from +0.9 percent in the Middle Atlantic division to +8.4 percent in the Pacific division.
National Association of Realtors’ existing-home sales, which also came out on Wednesday, reported that the median existing-home price for all housing types reached an all-time high in June.
The FHFA house price index compares homes sales on a monthly basis, while the NAR existing-home sales report compares year-over-year home price levels.
With home prices continuing to climb, baseline jumbo-mortgage thresholds may be raised for the first time in a decade. Jumbo mortgages for single-family residences exceed $417,000 in most parts of the country and $625,500 in high-price markets. But with home prices climbing back to pre-recession peaks in some markets like Honolulu, baseline jumbo thresholds may be raised for the first time in a decade.
The agency that sets these limits, the Federal Housing Finance Agency (FHFA), in May requested public input on its house price index. This index includes sale-price information on government-backed mortgages as well as real-estate sales compiled by research firm CoreLogic from hundreds of U.S. counties. Distressed sales are included but not appraisal values from refinances.
The deadline for input is July 27, and the FHFA will decide this fall whether to change the baseline limit starting Jan. 1.
In the early 1970s, the baseline limit for conventional loans was just $33,000. That was the maximum amount a homeowner could borrow to qualify for a “conforming” mortgage—one financed by Fannie Mae or Freddie Mac. The $33,000 limit rose steadily over the years to keep up with home prices. Hawaii, Alaska, Guam and the Virgin Islands got higher loan limits because of the high cost of living.
The Housing and Economic Recovery Act of 2008 established the current formula, which is based on median home-sale prices reported in a monthly FHFA survey. However, there is some wiggle room in high-cost areas, where conforming loans can exceed the baseline by up to 150%.
Justin Lee Thayer is Lane counties expert in market analysis for real estate investors. Call Justin @ 541-543-7287
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